PGE’s Avoided Cost Rate Reduction Rejected

On January 26, 2016, the Oregon Public Utility Commission (the Oregon Commission) rejected Portland General Electric Company’s (PGE) proposed avoided cost rate reduction. PGE had proposed to significantly lower avoided cost rates outside of the established rules and processes. The Oregon Commission chastised PGE for makings its procedurally incorrect filing, but urged the utility to re-file and have its avoided cost rates properly evaluated.  

Avoided cost rates are the prices that electric utilities pay to cogeneration and small renewable energy generators that sell power under the Public Utility Regulatory Policies Act. These electric generators, called qualifying facilities (QFs) have the legal right to sell power to the utilities at prices based on their “avoided costs.” State utility commissions approve the specific prices, subject to rules and standards under state and federal law.

PGE filed an avoided cost rate change on December 3, 2015. PGE’s filing proposed a 40-48% price reduction for their renewable avoided cost rates available to QFs selling renewable energy, and a 7-15% price reduction for standard avoided cost rates available to QFs selling non-renewable energy. PGE’s filing was also an “out-of-cycle” update, which means that PGE filed the price change between regularly scheduled updates. Finally, PGE included input changes that many parties believed were inconsistent with the Commission’s prior decisions.

The Oregon Commission has established some certainty for QFs and utilities regarding when avoided cost rates change. Specifically, there is an annual update filed on May 1 every year that are effective within 60 days, and another potential update after a utility’s long range integrated resource plan is acknowledged. Having certainty regarding price changes provides QFs an opportunity to plan their operations and complete their contract negotiations before rates change.

On January 26, 2016, the Commission concluded that PGE should follow the established process to update its avoided cost rates. This means that PGE was not allowed to obtain a nearly 50% renewable avoided cost rate reduction at this time. Instead, PGE will be required to follow the established process to change its avoided cost rates. PGE can propose to lower its avoided cost rates in annual update on May 1, 2016, and after acknowledgement of its next integrated resource plan. PGE is expected to make a filing on May 1, 2016, which will likely result in a smaller avoided cost rate reduction, assuming forward market electricity prices do not significantly change.

The Commission’s hearing can be viewed Here.

To watch the PacifiCorp hearing, click on the agenda item “2 PORTLAND GENERAL ELECTRIC: (Docket No. UM 1752)”.

The Commission’s order can be read Here.

Sanger Law represented the Renewable Energy Coalition, which advocates for reasonable PURPA policies on behalf of renewable QFs located in in Oregon, Idaho, Montana, Washington, Utah, and Wyoming.



These materials are intended to as informational and are not to be considered legal advice or legal opinion, nor do they create a lawyer-client relationship. Information included about previous case results does not assure a similar future result.